Realty sector tested by critical reforms this year; hopes for better 2018

New Delhi: The multi-year slowdown continued in the property market this year as sales and launches were hit due to triple tsunami -- demonetisation, RERA and GST -- but developers hope for recovery in 2018 driven by affordable housing that got infrastructure tag and other sops.

Real estate developers and consultants expect housing sales to improve, although gradually, as prices have become stable after much-needed correction in last few years and interest rates on home loans have softened.

With new supply likely to be restricted in 2018, the rise in housing demand and sales would lead to reduction in unsold stock, which is around 5-6 lakh homes currently. The sector is likely to see a major consolidation as many developers would sell their assets to complete ongoing projects and cut debt.

The year 2017 saw decline in housing sales and launches, which real estate players attributed to triple tsunamis faced by the sector in form of note ban announced in November 2016, new realty law RERA implemented from May and Goods and Services Tax from July.

During January-September 2017, housing sales and launches fell by 30 percent and 50 percent, respectively, in 7 major cities as compared to the year-ago period, according to Anarock Property Consultants.

Despite fall in sales, the private equity investment in real estate reached Rs 35,190 crore in January-September, 2017 and is likely to cross the last year's total investment figure of Rs 36,590 crore, as per Cushman & Wakefield data.

Nevertheless, home buyers pain aggravated, particularly in Delhi-NCR where two major developers Jaypee Infratech and Amrapali group became insolvent. Unitech remained in news for delays in delivery of projects and promoters were even jailed.

Thousands of home buyers in Delhi-NCR are stuck in distressed housing projects, even as courts were busy through the year trying to provide relief to consumers.

The new Real Estate (Regulation & Development) Act (RERA) do provide some ray of hope to home buyers as it promises to weed out fly-by-night operators from this industry.

Unlike housing segment, the commercial real estate fared relatively better and office space leasing fell by 7 percent due to decline in new supply and concerns over protectionist policy of some countries in early 2017.

The commercial real estate witnessed big-ticket deals, led by DLF promoters who divested stake in rental portfolio to Singapore's sovereign wealth fund GIC for Rs 9,000 crore.

But, the Real Estate Investment Trust (REITs), which is an instrument to boost investment in rent-yielding commercial assets, did not become a reality even this year.

Summing up 2017, realtors' apex body CREDAI (National) President Jaxay Shah said: "The year could go down as one of the most revolutionary years in the history of the Indian real estate sector post-independence.

"The implementation of a number of critical reforms such as RERA and GST have initiated a new era of transparency and accountability, which augurs well for the sustainable development of the industry."

He said the demand for both residential and commercial real estate are increasing.

National Real Estate Development Council's (NAREDCO) President Niranjan Hiranandani said sales and new launches were slow through most of the year.

Affordable housing, which got infrastructure status in Budget this year, will be the driver of real estate growth in 2018 given the initiatives and support from the government, he said, adding that low interest rates would help boost demand.

"Real estate developers are unlikely to forget 2017, which was like a bad dream come true, and look forward to better business in 2018," ANAROCK Property Consultants Chairman Anuj Puri said.

"With a massive focus now on affordable housing, this segment will be the posterboy of 2018," Puri added.

However, he said the year 2018 might not be different than 2017 as weak job market and slow GDP growth rate has negatively impacted consumer sentiment. Moreover, Puri said interest rates may rise from second half of next year due to inflationary pressure.

CBRE's Chairman (India and South East Asia) Anshuman Magazine said: "As the cloud around the RERA implementation settles, we expect overall activity to gain momentum in the coming months."

The concerted efforts towards affordable housing are likely to result in increased participation from private players in this segment, he added.

Knight Frank India CMD Shishir Baijal said the year 2017 was packed with uncertainty, volatility and long-term promise of new opportunities.

The battery of reforms in this sector tested industry stakeholders, he said, adding that buyers became cautious, while developers shifted focus towards understanding and then becoming compliant to these new laws.

However, Baijal said the new paradigm of transparency and consolidation achieved in the process would turn out to be a healthy stride in attracting buoyant global capital in the near future.